Guarantees & surety
Environmental Restoration Bond
Secures a site restoration or aftercare obligation imposed by a planning authority or the Environmental Protection Agency, for the full statutory aftercare period.
Boland’s Quay, Dublin · William Murphy, CC BY-SA 2.0
Who it is for
Quarry, landfill, wind farm and extractive site operators
What it does
- Written to local authority and EPA standard forms
- Long-dated: aftercare periods of 15–30 years accommodated
- Bond value indexed where the licence requires it
- Annual review of the restoration cost estimate
The product in full
A planning permission or a waste licence for a quarry, a landfill or a wind farm carries an obligation to put the site back. The authority granting it wants to know that the money will be there when the site closes — which may be twenty-five years after the company that opened it has ceased to exist. So it requires financial security, in a form it can call on without litigation.
A restoration bond provides that security for the statutory aftercare period. It is the longest-dated instrument we write, and it is underwritten differently for exactly that reason: nobody can form a view of a company’s balance sheet in 2050. What is underwritten is the credibility of the restoration cost estimate, the profile of the site, and the arrangements — indexation, periodic review, staged reduction as land is restored — that keep the bond aligned with the obligation as decades pass.
Indexation is the part operators most often overlook. A restoration cost estimated today, guaranteed flat for thirty years, is not going to restore the site. Where the licence requires it, the bond value is indexed, and the annual review of the cost estimate is what keeps that number honest.
Literature
Product literature is issued to appointed intermediaries. Ask your underwriter, or request it through the enquiry form.
- Restoration bond wordingOn request
- Cost estimate requirements noteOn request
How it works
What happens, in order
From the first enquiry to the point the cover, the contract or the facility is in place.
The licence sets the obligation
The local authority or the Environmental Protection Agency specifies the restoration and aftercare required, and the security to be lodged. Their standard forms are what we issue on.
An independent cost estimate is prepared
By a competent person, priced at today’s rates, covering restoration and the full aftercare period. That estimate is the bond value.
The bond issues, indexed where required
CPI-linked if the licence says so, with the mechanism written into the wording rather than left to be agreed later.
Annual review, and staged release
The cost estimate is reviewed each year. Where the site is restored progressively, the bond can be reduced against certified restoration rather than held at its opening value for thirty years.
The numbers
A worked example
Illustrative arithmetic, so the shape of the product is visible rather than described. Nothing here is a quotation or a projection.
A £900,000 restoration obligation over 20 years
A quarry operator holds a permission requiring restoration and a twenty-year aftercare period. An independent estimate puts the cost at £900,000 at today’s prices, and the local authority requires a bond for the full amount on its own form.
The operator is in band 2 with a parent counter-indemnity.
- Bond value
- £900,000
- Term
- 240 months
- Indicative premium rate
- 1.28% p.a.
- Premium for the term
- £230,400
- Issuance and arrangement fee
- £450
- Wording review fee
- £350
- Total indicative cost
- £231,200
- Cost as a share of bond value
- 25.69% of bond value
How the rate is built
- Base rate — Environmental Restoration Bond1.15% p.a.
- Financial strength — Band 2 — strong and consistently profitable−5%
- Security — Parent or director counter-indemnity−10%
- Wording — Conditional — default must be establishedNo adjustment
- Beneficiary — Irish or UK public body, Revenue or HMRCNo adjustment
- Term — Over 60 months+30%
The figure above is the premium for the whole twenty-year term at today’s rate, and it is paid in full on issue: premium is not collected year by year. For a bond of this size the desk may agree instalments, on conditions the operator signs — payment undertakings, cheques, deposits or other security. The bond value is reviewed each year against the current cost estimate.
Why an unindexed bond stops being enough
The same £900,000 obligation, indexed at 2% a year against a bond fixed at its opening value.
View these figures as a table
| Restoration cost, indexed at 2% | Bond fixed at opening value | |
|---|---|---|
| Year 0 | £900,000 | £900,000 |
| Year 5 | £993,000 | £900,000 |
| Year 10 | £1,097,000 | £900,000 |
| Year 15 | £1,211,000 | £900,000 |
| Year 20 | £1,337,000 | £900,000 |
Suitability
Where the Environmental Restoration Bond fits
The cases it answers, the cases it does not, and what an underwriter needs before quoting.
It is the right answer when
- A permission or licence requires financial security for restoration and aftercare.
- The obligation runs for years or decades and cash cannot sensibly be lodged for that long.
- Restoration is progressive, so the bond can reduce as land is handed back.
Look at something else when
- There is no independent cost estimate, so there is no bond value to write.
- The obligation is remediation of contamination already present, which is a different underwriting question.
What we need to quote
- 1.The planning permission or licence, with the restoration and aftercare conditions.
- 2.The independent restoration cost estimate, and the basis it was prepared on.
- 3.Accounts, group structure and the proposed counter-indemnitor.
Questions
What brokers ask us about this product
Can you really write a thirty-year bond?
Yes — aftercare periods of fifteen to thirty years are accommodated. The term is why the cost estimate is reviewed annually and why indexation and staged reduction are agreed at the outset rather than later.
Does the bond reduce as we restore?
Where the licence allows it and restoration is certified, yes. That is the single largest saving available on a long-dated bond, and it is worth asking the authority for at the permission stage.
What if the cost estimate rises?
The bond value is increased by endorsement at the annual review. An indexed bond does this automatically; an unindexed one needs the operator to act.
Request information
Ask us about the Environmental Restoration Bond
The form reaches an underwriter in Dublin. If you are an intermediary, say so and we will route it to the broker desk.